Question

Issue 18/08/2017 We Prepare for Future Careers JUAL Revision Date 25/06/2018 Form No.ECTIACAITOS OU Group Work 1 Question 1: The table below gives some of the items in the U.S. National Income and Product Accounts in 2017. (6 marks) Item Wages 11,600 Consumption Expenditure 16,000 Indirect taxes 2,684 Interest, rent, and profit 6,000 Investments 4,400 Government Expenditure 4,000 Depreciation 5,316 Exports 2,400 Imports 1200 1. Given the above information, is this economy a net exporter or a net importer? (1 mark) 2. Calculate U.S. GDP in 2017 using the two approaches? (4 marks) 3. In May 2017, I sell my house which was constructed in 2010 for 1 million dollars. Does this transaction affect the GDP of 2017? Justify your answer (1mark) vice or an intermediate goo

Answer 1

Part 1:

Exports = $2400

Imports = $1200

Since, the exports are more than the Imports, this particular economy is Exporting Economy

Part 2:

Expenditure Approach

GDP as per Expenditure Approach = Consumption + Investment + Government Expenditure + Exports – Imports

=16000+4400+4000+2400-1200 = 25,600

Income Approach

GDP as per Income Approach = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income#1

#1 = Net Foreign Factor Income – the difference between the total income that a country’s citizens and companies generate in foreign countries, versus the total income foreign citizens and companies generate in that country.

=11600+2684+6000+5316 = 25,600

Part 3:

GDP is measurement tool for calculating the amount of economic activity for a particular period. Therby, If you buy a newly built home, it directly contributes to total output of the current period (GDP), for example through investment in land and building materials as well as creating jobs. The local area also profits when new houses are built as newcomers will start using local shops and services.

Buying and selling existing homes does not affect GDP in the same way since there is no economic activity during the year. The accompanying costs of a house transaction still benefit the economy, however. These can include anything from estate agent, legal or surveyor fees to buying a new sofa or paint.

Conclusion: Does not affect the GDP